Israeli Securities Authority (ISA) proposed that Forex companies publish their client losses in an attempt to minimize the trader’s risk exposure.
ISA has published a draft proposing a requirement from Forex trading companies to publish client loses. The draft is open for public comment. As a step towards investors education, the transparency would allow traders to understand better the implications and consequences of trade before moving forward. After widespread speculation that most traders lose money in Forex deals, the proposed amendment would help keeping clients informed.
The agency hopes to address the risk in trading activities with the proposed measure. It aims to expose the reality that most traders lose their money in Forex market through transparency, facts and warnings, allowing potential investors to evaluate the risks properly.
The Forex market is based on trade of currencies with high lines of credit, stocks, and valuable commodities, like oil and gold as a collateral. The very nature of it is inherently unstable and unpredictable. With high default risk loans, offered at the rate of up to 1000 times the amount of the transaction, its fast pace and the frequent losses, many compare it to gambling.
Some officials see ISA’s proposition as an attack on Forex trading and fear it may eliminate it.
David Malits, Founder & CEO of DM Communications, said::
The merchant arenas are an issue in themselves and often receive less than stellar coverage due to their reputation. However, the power of regulation lies precisely in allowing industries to continue operating within a framework that protects everyone while allowing both businesses and customers free choice.
If one examines all of the regulator’s actions, they focus on transparency, competition, and fairness is prevalent. This move may reduce concentration in the capital market and increases competition in banking. The real driver behind this decision is likely part of an overall approach rather than an attempt to eliminate the industry.
Following global trends, the proposed amendment intends to bring awareness of the risks involved in Forex trading and protect future investors from hazardous trading activities and taking out high leveraged loans.